Australia and New Zealand Banking Group Limited (ANZ); Commonwealth Bank of Australia (CBA); National Australia Bank Limited (NAB); Westpac Banking Corporation (WBC):
Peer-to-peer lender SocietyOne has hit a purple patch, with strong first-half growth cementing its role as a real lending alternative to the traditional banking sector, where volumes are soft and the operating environment is as tough as ever. As the federal government looks to align itself with nimble and agile technology firms, and state governments fight among themselves for the right to host their outposts Down Under, it’s a very different state of affairs for Australia’s incumbent banks. The big four and Macquarie have resigned themselves to paying one new tax, appear to have successfully blocked another but are now bracing themselves for APRA’s definition of ‘‘unquestionably strong’’. They have already weathered two bouts of intervention in the mortgage market. The banks are trading well below their 52-week highs with ANZ down 13.1 per cent, Commonwealth Bank down 6.4 per cent, NAB down 12.6 per cent and Westpac down 13.5 per cent. NAB is attempting to lead within the big banks in the tech sector with Ubank, its digital-only arm, poised to deploy artificial intelligence on its banking platform and pump up its share of the savings market following an experiment that monitored the brain activity of spenders and savers. UBank chief executive Lee Hatton said the new technology would be launched later this year. It will build on the back of findings from the research in an effort to promote better financial habits among its customer base of close to 400,000.
Downer EDI Limited (DOW); Spotless Group Holdings Limited (SPO):
Downer EDI has warned Spotless shareholders the value of their shares may fall if they do not accept a $1.2 billion takeover bid by Tuesday night. ‘‘If the offer closes and Spotless remains on the official list of the Australian Securities Exchange, the Spotless share price is likely to trade at a substantial discount to the offer price,’’ Downer said on Friday. Spotless shares, which closed at $1.15 on Friday, were trading at around 72¢ before Downer made a hostile takeover bid in March. Downer had secured 61.4 per cent of Spotless on Friday after starting the week with 61.13 per cent of the services group, indicating few investors accepted its offer last week. The contractor remains well behind its goal of controlling 100 per cent of the company before its offer of $1.15 per share in cash closes at 7pm on Tuesday.
Harvey Norman Holdings Limited (HVN); JB Hi-Fi Limited (JBH), Myer Holdings Limited (MYR); Wesfarmers Limited (WES); Woolworths Limited (WOW); Retail Food Group Limited (RFG):
Woolworths’ and Wesfarmers’ liabilities will double and Myer’s liabilities will treble in 2019 – but not because of major acquisitions or a catastrophic crash. It’s because of new accounting rules. Under AASB 16 Leases, companies will be forced to bring operating leases onto their balance sheets for the first time from January 2019. The new standard will improve transparency and remove the guesswork associated with estimating lease liabilities. But it will also have a major impact on key financial metrics such as gearing ratios and return on invested capital, as the present value of leases will be represented on the balance sheet as an asset and a liability. All companies with operating leases will be affected, including the banks, telcos, airlines and miners. But the change will have the biggest impact on retailers, particularly large anchor tenants with 10 to 15 year leases. For example, Myer’s total liabilities will blow out from $760 million to at least $2.6 billion, compared with its current market value of $700million, and net debt to EBITDA will rise from 0.5 to 4.4, according to analysis by Citigroup. Fast food franchise Retail Food Group have already slumped 12 per cent last month after UBS analysts estimated that its liabilities would grow by $105 million. Wesfarmers finance director Terry Bowen also believes the change will introduce greater volatility in reported earnings and will make it harder for analysts and investors to compare retailers in similar categories. Harvey Norman, for example, owns many of its stores whereas JB Hi-Fi prefers to rent. Woolworths has opened scores of new supermarkets in recent years while Coles’ focus has been on refurbishing existing stores.
Lendlease Group (LLC); Mirvac Group (MGR):
Australia’s largest builders are putting apartment investors and owners at risk with glass imports that cannot guarantee the compliance of glazing they install on high-rise towers, says a local supplier. Large contractors rely too heavily on the certification accompanying their imported product without allowing for independent random testing to prove the material meets local heat-resistance and shattering standards, said Frank D’Urso, the national procurement director of local supplier Flat Glass Industries. The Australian Financial Review asked Multiplex, Lendlease and Mirvac how they guaranteed compliance of glass imports with Australian standards and if they independently checked their imports for compliance. ‘‘Mirvac procures all its glass via Australian-based subcontractors, and these subcontractors provide certifications that the glass complies with the Australian Standards as well as all relevant laws and regulations,’’ a Mirvac spokeswoman said. ‘‘Furthermore, Mirvac regularly engages independent third parties to provide further verification of its glazing systems.’’ Multiplex and Lendlease said nothing about independent verification.
Magellan Financial Group Limited (MFG):
Magellan Financial Group, the asset manager founded 11 years ago by Hamish Douglass and Chris Mackay , is on the verge of being the naming sponsor of (men’s) Test cricket in this country. The price tag is estimated at $6 million to $8 million, plus the same again on activation. Magellan bears no resemblance to the kind of brands to have splurged on major cricket sponsorships before it. Think brewer Carlton & United, telco Vodafone Hutchison, defunct airline Ansett and lung lolly purveyor Benson & Hedges. The question must be asked: how can an institutional investor generate any meaningful return on investment from a massmarket sponsorship property? Their interest, surely, implies an intention over the next three years to raise enough new capital (much more than a $1 billion LIC) to reach the kind of scale that will translate to serious, big four-like penetration of the retail wealth market. But with $52.2 billion of funds under management at May 31, it’s already very big indeed. Perpetual is a distant second at $31.9 billion.
(Source: AIMS)
Peer-to-peer lender SocietyOne has hit a purple patch, with strong first-half growth cementing its role as a real lending alternative to the traditional banking sector, where volumes are soft and the operating environment is as tough as ever. As the federal government looks to align itself with nimble and agile technology firms, and state governments fight among themselves for the right to host their outposts Down Under, it’s a very different state of affairs for Australia’s incumbent banks. The big four and Macquarie have resigned themselves to paying one new tax, appear to have successfully blocked another but are now bracing themselves for APRA’s definition of ‘‘unquestionably strong’’. They have already weathered two bouts of intervention in the mortgage market. The banks are trading well below their 52-week highs with ANZ down 13.1 per cent, Commonwealth Bank down 6.4 per cent, NAB down 12.6 per cent and Westpac down 13.5 per cent. NAB is attempting to lead within the big banks in the tech sector with Ubank, its digital-only arm, poised to deploy artificial intelligence on its banking platform and pump up its share of the savings market following an experiment that monitored the brain activity of spenders and savers. UBank chief executive Lee Hatton said the new technology would be launched later this year. It will build on the back of findings from the research in an effort to promote better financial habits among its customer base of close to 400,000.
Downer EDI Limited (DOW); Spotless Group Holdings Limited (SPO):
Downer EDI has warned Spotless shareholders the value of their shares may fall if they do not accept a $1.2 billion takeover bid by Tuesday night. ‘‘If the offer closes and Spotless remains on the official list of the Australian Securities Exchange, the Spotless share price is likely to trade at a substantial discount to the offer price,’’ Downer said on Friday. Spotless shares, which closed at $1.15 on Friday, were trading at around 72¢ before Downer made a hostile takeover bid in March. Downer had secured 61.4 per cent of Spotless on Friday after starting the week with 61.13 per cent of the services group, indicating few investors accepted its offer last week. The contractor remains well behind its goal of controlling 100 per cent of the company before its offer of $1.15 per share in cash closes at 7pm on Tuesday.
Harvey Norman Holdings Limited (HVN); JB Hi-Fi Limited (JBH), Myer Holdings Limited (MYR); Wesfarmers Limited (WES); Woolworths Limited (WOW); Retail Food Group Limited (RFG):
Woolworths’ and Wesfarmers’ liabilities will double and Myer’s liabilities will treble in 2019 – but not because of major acquisitions or a catastrophic crash. It’s because of new accounting rules. Under AASB 16 Leases, companies will be forced to bring operating leases onto their balance sheets for the first time from January 2019. The new standard will improve transparency and remove the guesswork associated with estimating lease liabilities. But it will also have a major impact on key financial metrics such as gearing ratios and return on invested capital, as the present value of leases will be represented on the balance sheet as an asset and a liability. All companies with operating leases will be affected, including the banks, telcos, airlines and miners. But the change will have the biggest impact on retailers, particularly large anchor tenants with 10 to 15 year leases. For example, Myer’s total liabilities will blow out from $760 million to at least $2.6 billion, compared with its current market value of $700million, and net debt to EBITDA will rise from 0.5 to 4.4, according to analysis by Citigroup. Fast food franchise Retail Food Group have already slumped 12 per cent last month after UBS analysts estimated that its liabilities would grow by $105 million. Wesfarmers finance director Terry Bowen also believes the change will introduce greater volatility in reported earnings and will make it harder for analysts and investors to compare retailers in similar categories. Harvey Norman, for example, owns many of its stores whereas JB Hi-Fi prefers to rent. Woolworths has opened scores of new supermarkets in recent years while Coles’ focus has been on refurbishing existing stores.
Lendlease Group (LLC); Mirvac Group (MGR):
Australia’s largest builders are putting apartment investors and owners at risk with glass imports that cannot guarantee the compliance of glazing they install on high-rise towers, says a local supplier. Large contractors rely too heavily on the certification accompanying their imported product without allowing for independent random testing to prove the material meets local heat-resistance and shattering standards, said Frank D’Urso, the national procurement director of local supplier Flat Glass Industries. The Australian Financial Review asked Multiplex, Lendlease and Mirvac how they guaranteed compliance of glass imports with Australian standards and if they independently checked their imports for compliance. ‘‘Mirvac procures all its glass via Australian-based subcontractors, and these subcontractors provide certifications that the glass complies with the Australian Standards as well as all relevant laws and regulations,’’ a Mirvac spokeswoman said. ‘‘Furthermore, Mirvac regularly engages independent third parties to provide further verification of its glazing systems.’’ Multiplex and Lendlease said nothing about independent verification.
Magellan Financial Group Limited (MFG):
Magellan Financial Group, the asset manager founded 11 years ago by Hamish Douglass and Chris Mackay , is on the verge of being the naming sponsor of (men’s) Test cricket in this country. The price tag is estimated at $6 million to $8 million, plus the same again on activation. Magellan bears no resemblance to the kind of brands to have splurged on major cricket sponsorships before it. Think brewer Carlton & United, telco Vodafone Hutchison, defunct airline Ansett and lung lolly purveyor Benson & Hedges. The question must be asked: how can an institutional investor generate any meaningful return on investment from a massmarket sponsorship property? Their interest, surely, implies an intention over the next three years to raise enough new capital (much more than a $1 billion LIC) to reach the kind of scale that will translate to serious, big four-like penetration of the retail wealth market. But with $52.2 billion of funds under management at May 31, it’s already very big indeed. Perpetual is a distant second at $31.9 billion.
(Source: AIMS)
Latest comments